The investors are a young married couple with a child. Their goal: saving for retirement. Together they’ve elected to go with a lower risk tolerance than they might have before they had a child, and their investment vehicles are all mutual funds. This is the asset allocation plan they might draft with their adviser.

Plan: Young married couple
Extra advice

In addition to a retirement fund, they need an education IRA or 529 college savings plan for the baby, says Peggy Cabaniss, CFP. One tip to make asset allocation for that account easy: Most 529 plans have an asset allocation based on the child’s age.

Because they have a child, an emergency account is even more important. Aim for six months’ worth of living expenses and keep it liquid in something like a high-interest savings account, money market account or short-term CDs, says Cabaniss. They also need a similar cash account to save for big purchases like a home, car or major remodeling project.

Source: Portfolio drafted by Peggy Cabaniss, CFP, president of HC Financial Advisors in Lafayette, Calif., and past chairman of the national board of the National Association of Personal Financial Planners.

Promoted Stories